Is this a deal that I should look more into or leave it?

[Jeremy Muehlbauer]

I have an off market opportunity to purchase a 5 plex in one of the best cities in Minnesota (edina).  I'd like comments on whether or not people think this is a good buy.   Here's the numbers. 

4 units are 2 bed 1 bath

1 unit 1/1

some units fully updated some not

-purchase price 1.2 mil

-20% down

-seller financing @ 6% balloon after 4 years

-12000 for taxes

-3600/year for insurance 

current rents  are low at 1600x4= 6400

and 1000 for the 1/1. Total current rents are 7400/mo.

On my spreadsheet I use if rents increased to a total of 8500 with 5% vacancy/Capex/ repairs/lawn and self property mgmt technically I show a -450/mo but I'm wondering if the fact that the area is so good and appreciation in the area is almost guaranteed is it still worth it? Any comments or suggestions welcome. Thanks, Jeremy.

[Evan Kraljic]

Edina is a fantastic location for rentals but I can't advocate for buying something with negative cashflow even after taking into account your rent increases and you self managing. You're estimating expenses are probably low at 33% of gross rents including prop taxes and insurance, and even with that I have you buying at a 5.9 cap (71k NOI after stablization/1.2 million PP) and you're borrowing at 6% interest rate, which isn't a good buy to me.

If it don't make dollars, it don't make sense.